Current Internet Business Models and Virtual Communities Jaana Porra, Ph.D. University of Houston jaana@uh.edu

1. Current Internet Business Models and Virtual Communities Jaana Porra, Ph.D. University of Houston jaana@uh.edu

2. Virtual World is Here but It is Unevenly Distributed • The virtual world is a vast empty space comparable with the earth after a mass extinction such as occurred 65 million years ago. • On earth this mass extinction wiped out entire ecosystems (compare: old economy industries) making room for new species (compare: www.com’s). • Dinosaurs and other vanished species were rapidly replaced by new species that looked and behaved differently yet equally effectively they populated the earth. (The dawning new economy firms -- and their customers may be vastly different form the ones we know today.)

3. Virtual Commerce is Real Commerce • During the first few years of electronic commerce (1994-1996) an estimated4,690 Internet companies were started in the U.S. Nearly 2,400 of them were started in one year (1996). • More than 189,000 new Internet jobs were estimated being available in the U.S. in 1997 • Christian and Timbers, an executive search firm in Ohio • Since 1997 in the U.S., electronic commerce has penetrated the business world independent of company size, age or industry. In some cases the Internet now competes with the company’s own sales force and its traditional distribution channels. • Porra and Parks, 1999 Year 2000: “In the near future, every firm will be an Internet Firm.”

4. Virtual Business Models Create Real Profits • Five years into e-commerce, firms small and large eagerly search for ways of creating revenue on the Internet • During these few years increasingly elaborate business models have emerged. They include ideas such as, • charging-for-advertisement space • owning-after-payment • testing, testing-to-own • subscribing-to-a-service • renting product/service, renting space (virtual malls) • charging for transactions • charging access fees (ISPs, AOL).

5. The First Five Years of E-Commerce Have Produced Three Generations of Virtual Business Models • 1. Making money on product or service: First generation Internet business models were product driven (companies selling products or services over the Internet) • 2. Making money on virtual communities: Second generation Internet business models are community driven (companies sell access to their member base) • 3. Making money on information about product, service or member: Third generation Internet business models are information driven (companies sell information about products, services or members)

6. Virtual Communities Work Like This… • Virtual communities are Web sites for like-minded individuals. • Virtual communities host useful, interesting or important services (e.g., free Internet access, e-mail, chat rooms etc.) to attract members • Contracts bind members to a long term relationship with the community • Virtual community providers collect information about their members, turn around and sell this information to third parties for profit • Merchants rent space and pay transaction fees to the virtual community providers to gain access to its members

7. But are Virtual Communities Communities at All? • Over the past century, many have attempted to explain what a human community is. This has turned out to be difficult task because “community” is an elusive notion. • According to Effrat (1974): “Tying to study a community is like trying to scoop up jello with your fingers. You can get hold of some, but there is always more slipping away from you.”(p. 1). • Communities are said to relate to organizations, action, planning, interaction patterns, institutions, norms, and roles to name a few aspects of community research. • They are said to require membership, relationships, commitment, generalized reciprocity, shared values, common practices, collective goods and duration (Erickson, 1997).

8. Consensus: Community is Its People • Hillery (1955) classified ninety-four definitions of a community. According to him, descriptions of rural communities are different from more general community descriptions and modern communities are different from traditional communities. • But despite the considerable ambivalence concerning the meaning of a community, most community descriptions share some understanding of what a community is. • Two thirds of the 94 community definitions are in accord that social interaction, common geographical area, and common ties are essential in a human community. • Only one element of a human community, however, is shared by all definitions prior to 1955: communities consist of people.

9. Is this Enough to Design a Virtual Community? • Hillery concluded that beyond the only point of agreement that community consists of actual human beings, no consensus of any defining characteristics of a human community were found during the first half of the 20th century. • The next fifty years did not change this circumstance. • Rather, the community notion has expanded to include human groups of any size, any purpose and any level of analysis. • Today “community” is what ever suits the purpose of the definer of the user of the concept.

10. For example, How Many People are Needed to Form a Community? • No consensus exists about the size of a community. No agreement exists concerning the appropriate level of analysis. • Gillette (1926) believed that communities coincide with societies, cities, villages, and neighborhoods. • McClenahan (1929) maintained that communities exist at the level of societies because they include legal, administrative and political processes. • Etzioni (1995) suggests that a family can be a community. Families are parts of neighborhoods. Neighborhoods are parts of suburbs, cities or regional communities. These in turn, often are part of larger ethnic or racial or professional communities. All these communities are parts national societies -- also communities. Ultimately, a community could encapsulate all humanity.

11. Where are the Boundaries? • (1) the locale: only so many people can share one locale; • (2) social interaction: only so many people can interact with one another. • Prize (1979) holds that the maximum size of a community is the maximum number of people who are able to share a single moral voice. • Etzioni (1995) defines such a moral community as a “web of social relationships that encompasses shared meanings and above all shared values” (p. 24).

12. Note: Modern Communities Do Not Need People • Over the past fifty years, the most important expansion of community research is that it has lost its only common denominator ever: Modern communities no longer necessarily consist of actual human beings. • Etzioni (1995) maintains that modern communities are not always real but can also be “imagined.” • Modern communities mainly exist in their members’ minds (e.g., religious communities). • Theories such as Giddens’ structuration theory describe how a sense of a community is created and reinforced in occasional, temporary gatherings.

13. What Holds a Modern Community Together? • In modern communities, shared rituals help maintain the sense of belonging even when the actual individuals change from one gathering to another. • In modern communities, individuals are members of several communities at the same time. • Modern communities are specialized contexts of interaction at home and at work. • Etzioni (1995) suggests that multi-memberships in many special purpose communities are particularly important today because they protect individuals from excessive pressure imposed by any single community.

14. Some Say Nothing…: Human Community is Extinct… • Edwards and Jones (1976) hold, urbanization, industrialization and modernization have destroyed human communities: Communities used to be “small, self-contained, autonomous, fairly secluded locality groupings with intimate social interaction and strong communal ties of mutual concern predominated” modern communities are “inanimate” (p.25). • Sources of energy increased per capita productivity and made it possible for increasingly larger numbers of people to occupy a common geographic locale and to engage in increasingly different kinds of occupational activity. • “Increasing numbers of people play roles in some large-scale bureaucratic organization or some special-purpose association whose basic goals and policies are determined outside the community.” (Edwards and Jones, 1976, p. 25).

15. Ingredients of The Destruction of Community • Selznick characterizes the destruction of communities as: • (1) weakening of social ties and creation of new bonds based on more rational, more impersonal and more fragmented forms of thought and action; • (2) structural separation of spheres of activities, groups, institutions and roles; • (3) seqularization of morality; and • (4) rational co-ordination by contract and bureaucrazy. • The modern social group is a composite of segmental ties and relationships. People are abstract individuals. They are utilitarian, transitory, interchangeable, homogenous and without symbolic significance.

16. What Have We Done to Humanity… • Selznick holds “the loss of genuine, intrinsically harmonious culture is a loss of spiritual well-being, the integration of personal, moral, communal and aesthetic experience: • “In some circumstances the destruction of this person-centered harmony is a threat to life itself.” (Selznick, 1992, p. 7). • The extreme symbolization of actual human beings and their communities may go hand in hand with cruel and inhuman moral systems (Jaeger and Selznick, 1964). • Modernity, holds Selznick, weakens culture and fragments experience. A genuine community is not a collection of abstract principles or precepts. It is taking people for what they actually are.  

17. And…Does Anyone Care? • Hamilton (1985) holds that any predictions of the end of community are mere expressions of frustration over a century of attempts to define the ever-elusive concept. • It is time to leave behind any such “stale debates” about how community should be defined. • He holds, we should forget about attempts to situate community into contexts subordinating localism, ethnicity, macro-social forces, or -- actual people. • Instead, communities should be considered mainly symbolic in character. Cohen suggests it is best to just “use” the community notion in its modern symbolic meaning and not worry about what a community actually is because a community is whatever meaning its members assign to it.

18. How to Implement Virtual Communities on These Principles? • It is tempting to accept Cohen’s viewpoint that we should just “use” the community notion without being overly concerned about what the fundamental characteristics of communities might be. The practice of social theory has proven that it is possible to do first class community research relying on a fuzzy concept. But those attempting to design virtual communities face a dilemma. In a computer-based environment it is necessary to decide what a community is before it can be designed into an information system.

19. What Are Virtual Communities Made Out Of Anyway? • To date, virtual community researchers have dealt with the elusive community notion either by • (1) redefining community as an on-line discourse; or • (2) experimenting with community -like characteristics for virtual community design. • In both cases, the virtual community concept is used to refer to many different kinds of human groupings with varying characteristics.

20. Option 1: Community is A Discourse Community • Erickson (1997), suggests that we should design virtual communities in the context of genre. • Genre shifts the focus from issues such as “the nature and degree of relationships among ‘community members’, to the purpose of the communication, its regularities of form and substance, and the institutional, social and technological forces which underlie those regularities.” (p. 13). • In this context, a virtual community is redefined as a “discourse community”. • Members of such a community are those who participate in an on-line discourse.

21. Discourse Community Defined • Discourse community is the mechanisms of supporting on-line conversations. • Defining virtual communities as a genre suggests a focus on: • (1) the communicative purpose of the discourse; • (2) the nature of the discourse community; • (3) the regularities of form and content of the communication, and the underlying expectations and conventions; • (4) the properties of the current situations in which the genre is employed, including the institutional, technological, and social forces that give rise to the regularities of discourse (Erickson, 1997). • The communicative purpose of a discourse community can simply be “to have polite, friendly and thoughtful topic oriented conversations” (Erickson, 1997).

22. Option 2: Experimenting With Community-like Characteristics • Not surprisingly, different interpretations of virtual communities lead to vastly different design objectives. • Advocates of the virtual communities as a corporate tool, aim for qualities such as “minimizing social overhead,” imposing “minimal attentional demands on co-workers,” unobtrusive question asking, and “immediate responses” (Bradner and Kellogg, 1998). • Those promoting more informal virtual communities list objectives such as “passing on tribal knowledge” (Toomey, et.al., 1998), creating an “informal atmosphere” (Bradner and Kellogg, 1998), facilitating a “social balance” (Bradner and Kellogg, 1998), or initiating “active participation” (Fuchs et.al., 1998),

23. But What is a Member? • Many virtual teams in corporate environments fundamentally rely on the premise that their members are real • Other virtual communities, however, rely on the premise that their members assume imagined roles. • In the latter case, the imagined identities are assigned at least in two ways: • (1) The designer of the environment assigns an identity to each member or • (2) each members create their own on-line identities. • In either case, the virtual community is primarily a community of manufactured members.

24. Some Open Questions • The community concept is attractive in cyberspace where “another Web site is just a mouse click away.” • How much are virtual communities like real communities? • Are virtual communities sustainable?

25. Actual Communities Still Exist… • In nature, after mass-extinction, colonies (small groups formed of representatives of species) may suddenly and unexpectedly become populous and take over the released turf (Eldredge and Gould (1972). • This event is largely non-confrontational and non-competitive. • The new population merely grows to new possible size because the space for this growth exists (Eldredge and Gould, 1972).

26. What If Virtual Communities Were Like Animal Colonies? • If virtual communities were viewed as animal colonies, they would use the Internet as a vehicle of longevity and expansion independent of any virtual community provider. • They would be formed by people who spend long time periods in each other’s company sharing, trusting, co-operating, and supporting one another for a common future. • Because, in nature, a colony (community) is always based on long term physical proximity, shared history and common future.

27. Mechanisms That Hold Colonies Together Formed over a 3 Billion Year Period... • Colony members have a long shared history and a common future together. Virtual community members do not share a past or future in the real world. Each member may visit the virtual community once and it is still called a community. • Colonies are collectives capable of radically changing themselves Virtual communities can fundamentally be changed only by the provider. • Colonies are based on its members knowing one another and caring about one another Virtual community members know about other members what they disclose on-line. Virtual community members do not need to care about other members.

28. Mechanisms That Hold Colonies Together Formed over a 3 Billion Year Period... • Colony’s tradition and culture is preserved in its members. Colonies transform themselves based on this historical knowledge of themselves. Virtual communities mainly exist on computer discs as discourse communities. Discourse communities are not dependent on any one member. On-line discourse cannot change itself. • Colonies have structures and norms they created. Virtual community members only rarely have means to create their own structures or norms. • Colonies grow and diminish in size equally effortlessly and suddenly; Colonies are rarely composed of more than a thousand members. Bigger is not necessarily better. Virtual communities are founded on the ideal of continuous membership growth. Bigger is perceived to be better.

29. Mechanisms That Hold Colonies Together Formed over a 3 Billion Year Period... • Colony members share purposes and goals they strive for in concert. Virtual community members may share income levels and consumption habits but they often explore virtual communities alone. • Colonies have all power over themselves Virtual community members are mainly customers and consumers subordinate to community providers. Sometimes the provider imposes power struggles by giving members differential privileges. • Colonies have internal control mechanisms Virtual communities are controlled by the community provider

30. Communicating Community in Virtual Space… • Virtual community is an attractive idea to modern time urban professionals who have often lost the sense of community possibly for good. • Incidentally, this is the very demographic group flocking onto the Internet. • The problem problem remains how to recreate communities in cyberspace for individuals who do not know what a community actually means… • If we are not able to communicate what a community is…how can we expect to implement its lasting virtual representations?

31. Some Suggestions for Implementing Sustainable Virtual Communities • (1)   Intercommunication of the members (many-to-many interchange of information, interdependence for information shared within the community). • (2)   Pre-existing relationship between the members • (3)   Continuous participation (participants both give and receive) • (4)   Culture/Traditions/Customs of the community that are inherited and are to be passed on to new members. • (5)   The community has a sustainable purpose that will exist beyond the past and current members of the community.

32. How to Implement Sustainable Virtual Communities • We suggest that some qualities of spontaneous human communities can be implemented by manipulating: • (1) formation and dynamics of virtual communities; • (2) services of virtual communities; and • (3) technology of virtual communities. • In this three level structure, the various levels are connected at least in two ways. • (1) How humans spontaneously form virtual communities and how they interact in these over time will affect what types of services are needed and how technology will be used to provide them. • (2) On the other hand, new technologies create new ways of providing services, which in turn may change what services are central in how humans form and sustain virtual communities. The model of naturally occurring colonies may suggest different reasons for sustainable communities to form and succeed than are normally assumed.

33. Kiitos! 2000 Jaana Porra University of Houston